Greece downgraded to junk status after figures show black hole widens

Greece's sovereign debt rating has been slashed further into "junk" territory, as the depth of the country's financial woes were laid bare in new figures showing the economy slipped further into the red following the election of its Leftist government.

Greece's sovereign debt rating has been slashed further into "junk" territory, as the depth of the country's financial woes were laid bare in new figures showing the economy slipped further into the red following the election of its Leftist government.

Athens' primary budget surplus, which excludes its debt interest payments, shrunk to just €1bn during January and February, compared to €3.17bn over the same period in 2014, according to figures from the Ministry of Finance.

Continued uncertainty around the country's future saw Standard & Poor downgrade the country's sovereign debt further into "junk" territory.

S&P slashed Greece's ratings to CCC+ from B- with a "negative outlook", warning that "without deep economic reform or further relief, we expect Greece's debt and other financial commitments will be unsustainable".

The move follows similar action from fellow ratings agency Fitch, who cut their debt rating last month.

Greece's public debt has hit an eye-watering 177pc of GDP in 2014 or €317bn, according to the Hellenic Statistical Authority.

The debt pile has grown from 154pc of economic output in 2012, as the economy has undergone severe growth-retarding austerity in order to remain eligible for its €240bn international bailout.

Despite evidence the coffers are running dry, Athens' leftist government still aims to hit a surplus target of 1.5pc of its GDP this year, as it seeks to implement a series of revenue raising measures. But since Alexis Tsipras's Syriza party was elected in late January, tax revenues have collapsed and capital has fled the country's banks. S&P calculates the economy has already contracted by 1pc in the last six months, making surplus targets a near impossibility.

Speaking ahead of a meeting of finance chiefs next week, Mr Kazimir said he was "sceptical" of a deal being reached by the end of the month.

Eurozone creditors have insisted the government carries out further cuts to its wages and pensions, and raise cash through selling off its public assets. The government has protested it will run out of funds to continue paying out its state obligations if a release of cash is not arranged in the coming week.

But a spokesman for the German finance ministry said there would be no smaller injection of bail-out money this month.

Friederike von Tiesenhausen repeated the full €7.2bn would only be released when creditors deemed Greece had sufficiently met its reform criteria.

Contrary to many fears, Germany's finance minister Wolfgang Schaeuble dismissed the prospect of market contagion should Greece be forced out of the eurozone.

"If you look at Greece, it's not a major part of the economy of the eurozone as a whole," Mr Schaeuble said in New York yesterday. "Most participants of financial markets are telling us that markets have already priced in whatever will happen. You can't see any contagion."